Venezuela Summons Bondholders, but Default Appears Closer

CARACAS, Venezuela — The Venezuelan government invited bondholders on Friday to begin negotiations later this month to restructure the country’s $120 billion foreign debt, which has put the country near bankruptcy.

But bondholders and analysts said the offer was unlikely to draw much interest, moving the country closer to default.

Vice President Tareck El Aissamí, who is a target of United States sanctions over allegations of drug trafficking, appeared on television to propose beginning talks on a restructuring in Caracas on Nov. 13. He made the invitation the morning after President Nicolás Maduro, announcing the debt strategy, appointed him to head a government team in such negotiations.

In a defiant message, Mr. El Aissamí demanded that creditors agree to a restructuring of debt terms. He also said United States sanctions barring American banks from buying new bonds or negotiating loan deals with Venezuela amounted to “financial persecution” and an “insolent imperial policy of domination and economic asphyxia.”

Venezuela promised on Thursday to make a $1.2 billion payment on a state oil company bond, but by initiating a call to restructure and refinance the country’s debts, President Maduro put future payments in doubt. Venezuelan bond prices sank in global market trading on Friday as investors spoke of an inevitable default.

“The way in which this has been handled does not give confidence that refinancing or restructuring talks will start smoothly nor that there will be a quick solution,” said Stuart Culverhouse, head of sovereign and fixed-income research at Exotix Capital, an emerging-markets investment bank and broker that trades Venezuelan bonds. “It is not really clear what the government intends, nor whether it can do anything at all with U.S. sanctions in place.”

Mr. Culverhouse said some investors might be willing to go to Caracas for negotiations, but he added, “I cannot see how American investors would, given the sanctions on Venezuela and on the vice president personally.”

The United States has imposed a range of sanctions against Venezuela over its repressive policies, including a move in August that restricts trading of Venezuelan bonds sold by the government in the American financial markets. The sanctions against Mr. El Aissamí came in February, when the Treasury Department said he was involved in narcotics rackets from Colombia to Mexico.

Financial experts say there is little or no benefit for Venezuela to go into default. While the country could save as much as $7 billion from not making debt payments over the next year, the savings could be offset by lost oil exports. Oil-service companies that go unpaid will curtail their work for the national oil company, Petróleos de Venezuela, or Pdvsa, and bondholders could demand confiscation of Venezuelan oil payments in the United States.

The only reason to default, many say, is that the nation’s $10 billion in reserves is not enough to cover debt obligations but could be used to import badly needed food and medicine.

Experts say the Venezuelan government may try to get around the American sanctions. It could try to issue and market a new bond outside of the United States, but such bonds would probably be unattractive if they cannot be traded on American markets. It could also issue new bonds to pay for food and medicine imports, but such humanitarian bonds require monitoring to guarantee that the money is actually going where it is supposed to — and Venezuelan officials are unlikely to accept such strings.

Alternatively, the government could pay the Pdvsa bonds on schedule but not other government bonds.

“The key question then becomes whether authorities are willing to continue making debt payments in the absence of an agreement with bondholders,” Torino Capital, the New York-based investment bank, wrote in a report to investors. The bank noted that if Venezuela continued to make payments, “bondholders will have little incentive to participate in a deal,” but that if it stopped making payments, it would leave itself open to confiscations including money earned from oil shipments to the United States.

The biggest immediate stumbling block to a renegotiation is Vice President El Aissamí himself, whose appointment puzzled many experts and makes negotiations with American investors impossible unless the Trump administration suddenly changes its policies toward Venezuela.

“There are compliance restrictions for negotiations, because the head of negotiations on the presidential committee is a designated narco-trafficker,” said Siobhan Morden, a Nomura managing director who is head of the bank’s Latin America fixed-income strategy. “That’s a constraint, a nonstarter for any negotiations at this stage.”

If negotiations break down, or never get off the ground, years of legal wrangling over Venezuelan assets, including oil tankers and even refineries in the United States owned by Citgo, a subsidiary of Pdvsa, could follow.

“Pdvsa is really in a doom loop,” said Steve Hanke, a Johns Hopkins University economist who closely watches Venezuela. “At some point the bondholders will have to say, ‘Wait, what are you doing to us?’ and someone will exercise their legal rights. Pdvsa can’t just unilaterally dictate what is going to happen without some bondholder pushing back.”

A version of this article appears in print on , on Page A6 of the New York edition with the headline: Venezuela Summons Bondholders, but Default Appears Closer. Order Reprints | Today’s Paper | Subscribe